Concept: Trade Deficit + Balance of Trade
Category: Currency valuation
Related News: Various Sources
CNA mentions: 1(July 22)
Trade Deficit + Balance of Trade
A trade deficit occurs when a country’s imports exceeds its exports. In this situation, there is an outflow of domestic currency to foreign markets. Here, the balance of trade is said to be negative or unfavourable. Informally, there is said to be a trade gap. In contrast, if a country exports more than it imports, the trade balance is said to be positive or favourable. Then there is said to be a trade surplus. The balance of trade of a nation is a part of the current account. The current account also comprises of other transactions like the income from the NIIP or the net international investment position and international aid. When a country’s current account is in surplus, its net international asset position rises accordingly. Needless to say, a trade deficit brings down a country’s net international asset position. The balance of trade is also called the net exports or the commercial balance. India has a trade deficit and the average balance of trade was US$ -2314.14 million from 1957 to 2017.